Source: Gazeta Mercantil

By Denis Cardoso

São Paulo, August 15, 2005 - Study by GV Consult assesses sectoral and regional impacts of the unification of ICMS rates. Debate the tax burden in the midst of the crisis that shakes Brazilian politics and the summit of the Lula government. The initiative, which will be put into practice today, at a seminar held in São Paulo, is more than timely, according to the opinion of Emerson Kapaz, president of the Brazilian Institute of Ethics in Competition (ETCO), the entity responsible for organizing this Monday's meeting. . "In this turbulent moment, the discussion about tax reform fits like a glove," says Kapaz. “After all, where does the cash from box 2 come from?”, He asks, referring to businessmen who act illegally (tax evasion and smuggling) to escape the high Brazilian tax burden.

The seminar “Tax evasion vs. tax burden: Is there a balance?” it will be based on an unprecedented study by GVconsult, which, among other points, presents alternatives to the reform proposal that is being discussed in Congress (PEC 285/2004). According to the work, the current text “has been generating a great deal of controversy, because, in addition to resulting in large losses for some states, there is a risk of an increase in the global tax burden and that associated with products that are easier to collect, such as fuels, energy and drinks".

The event for today includes the presence of the governor of São Paulo, Geraldo Alckmin, the former minister and federal deputy Delfim Netto (PP-SP) and the Executive Secretary of the Ministry of Finance of São Paulo, Murilo Portugal.

“The main idea of ​​this work was to develop tools that can serve as an aid to the development of tax reform, under way in the National Congress”, says Kapaz. Thus, the study sought to assess the macroeconomic, sectoral and regional impacts of the main point of the current reform proposal: the unification of ICMS (Tax on Circulation of Goods and Services) rates in five ranges for the entire country, with the possibility of taxation state selective for specific products.

According to the president of the ETCO Institute, from the investigations, it was possible to simulate three alternative scenarios for the reformulation of the ICMS rules, which will be presented in detail today in São Paulo. In each of the three proposed scenarios, according to Kapaz, we sought to find answers to the most frequent questions about the reform, such as: which states will have losses; which regions will benefit; and how states affected by the changes will be compensated.

According to the study, the first scenario, designed as a starting point for the analysis, "seeks to preserve the current ICMS tax structure, with minimal sectorial redistribution and little change in the current situation". The effects outlined by “scenario 2” are the closest, according to Kapaz, to what would be, in practice, the results generated from the current existing proposal for tax reform. "This scenario opens space for states to find an average ICMS rate ideal for certain products, which could reach up to 30%". The effect of this, he says: an even more costly tax equation.

“In this case, the average nominal rate of the ICMS would go from 11,5% of the consumer price to 13,6%, bringing a perverse result for the country's economy, such as the fall of almost 6% of the potential GDP, which means a loss of R $ 83 billion for society and, consequently, the closure of almost 4 million jobs ”, he guarantees.

According to Kapaz, the scenario considered ideal by scholars proposes a simplification of the existing tax structure, which would represent favorable macroeconomic results - “such as the generation of 2,3 million jobs in the period of one year - and, at the same time, time, would facilitate control and inspection. In this scenario, only three levels of rates are proposed (instead of the five existing bands in the current proposal) and a maximum tax collection ceiling of 22% is still established. "In practice, this would represent an average global rate of 10,7%, well below 11,5%", explains the president of ETCO.

The Brazilian tax burden has evolved in recent years, according to the study. It went from 28,6% of the Gross Domestic Product (GDP) in 1997 to 34% of all the country's wealth in 2003, an increase of 5,4 percentage points. The total taxes levied on companies and other components of demand, in addition to taxes on income and property paid by families, reached R $ 529,45 billion in 2003. The greatest weight falls on the productive sector, responsible for more than two thirds of the gross tax burden, or R $ 352 billion. The ICMS is the one that has the greatest weight in the tax burden of the productive sectors. Of the total amount collected in 2003, 51,7% corresponded to taxes related to production and imports, with 29,7% referring to ICMS. In the Country average, the ICMS represented 89,5% of the collection of the federative units.